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City trustees present updates to Title 28 Municipal Employees Retirement Plan; funding-policy language revised
Summary
Municipal Employees Retirement Plan trustees described proposed edits to Title 28 covering administrative definitions, beneficiary defaults and a funding-policy change that would hold employer contribution at 17% of non-sworn payroll until actuarial targets are met, then permit gradual reduction toward normal cost.
Trustees and plan representatives briefed the council on a package of updates to Title 28, the city ordinance governing the Municipal Employees Retirement Plan (MERT), including administrative clarifications and a substantive change to how employer contributions are managed when the plan reaches funding targets.
James Wagner, a MERT trustee, provided background on the plan and the revision project. "This is a plan that's governed by seven trustees ... it has 2,600 active members," Wagner said, and he reported the plan manages about $640 million in assets. He described the review as separated into administrative-clarity changes and policy changes, and turned to Tanya (plan administrator) to review administrative edits.
Tanya said staff updated definitions used in benefit calculations, removed language referencing optional contributions that the plan no longer accepts, adjusted default beneficiary language to prioritize a surviving spouse before the estate, established a mandatory refund process for nonvested accounts that have remained in the plan for more than three years (with different paths by balance size), and removed an infrequently used "guaranteed period" option. Regarding retirement-age calculation language, Tanya said the plan will reference an individual's Social Security normal retirement age rather than fixed ages previously written into the ordinance.
On funding policy, Wagner explained the plan adopted an amortization approach about 10 years ago to close the unfunded liability and currently projects being on track to reach full funding in about 16 years if current assumptions hold. "The way we're getting there right now is that the city is contributing 17% of payroll ... and the employees are contributing 8%. So a total of 25% of payroll ends up going into the retirement plan. Today, we're at about 68% funded," Wagner said.
Wagner said the proposed change would increase the employer-contribution floor language to 17% (reflecting current practice) and change the threshold for when the employer can begin reducing contributions: rather than lowering employer contributions once the plan is 120% funded, the draft would require employer contributions to remain at the higher level until the plan reaches 100% funded, at which point the ordinance would allow a gradual reduction year-by-year toward the normal cost (roughly 12%) with limits on how quickly contributions can be reduced and parameters for restoring contributions if funding falls below 100%.
Wagner and Tanya said a public hearing and required legal notices have occurred for pieces of the update; section 1000 has already passed council and mayoral approval to add an outside-agency trustee seat to represent non-city agencies in the plan. Wagner said the ordinance changes and funding-policy language were drafted with input from the plan’s subcommittee, legal counsel and actuary. He also said employees sometimes attend board meetings and the board incorporated employee feedback on benefit-option language when raised.
Councilors asked whether union or employee groups had been formally engaged; Wagner said employees sometimes attend open board meetings but there was not a formal bargaining-unit consultation process tied specifically to this revision. A councilor asked for the dollar amount represented by employer contributions; staff said the employer contribution is 17% of non-sworn payroll and that a precise dollar figure would be provided on request.
No formal council vote occurred on Title 28 during this meeting; presenters provided the update and said additional administrative and legal steps are in progress.
